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Friday, February 19, 2010

Ronald Kitching: Ludwig von Mises, The Anti-Capitalist Mentality

Here is an essay that I hope will inspire readers to get Ludwig von Mises’ book and study it. It is an extract from his book titled The Anti-Capitalist Mentality: A nation is the more prosperous today the less it has tried to put obstacles in the way of the spirit of free enterprise and private initiative...

Introduction

The substitution of laissez faire capitalism for the pre capitalistic methods of economic management has multiplied population figures and raised in an unprecedented way the average standard of living. A nation is the more prosperous today the less it has tried to put obstacles in the way of the spirit of free enterprise and private initiative.

The people of the United States are more prosperous than the inhabitants of all other countries because their government embarked later than the governments in other parts of the world upon the policy of obstructing business.

Nonetheless, many people, and especially intellectuals, passionately loathe capitalism. As they see it, this ghastly mode of society’s economic organization has brought about nothing but mischief and misery. Men were once happy and prosperous in the good old days preceding the Industrial Revolution.

Now under capitalism the immense majority are starving paupers ruthlessly exploited by rugged individualists. For these scoundrels nothing counts but their moneyed interests. They do not produce good and really useful things, but only what will yield the highest profits.

They poison bodies with alcoholic beverages and tobacco, and souls and minds with tabloids, lascivious books and silly moving pictures. The “ideological superstructure” of capitalism is a literature of decay and degradation, the burlesque show and the art of striptease, the Hollywood pictures and the detective stories.

The bias and bigotry of public opinion manifests itself most clearly in the fact that it attaches the epithet “capitalistic” exclusively to things abominable, never to those of which everybody approves. How can any good come from capitalism!

What is valuable has been produced in spite of capitalism, but the bad things are excrescence's of capitalism.

It is the task of this essay to analyse this anti-capitalistic bias and to disclose its roots and its consequences.

And an extract from page 86.

To speak of the productivity of labor makes sense only if one refers to the marginal productivity of labor, i.e., to the deduction in net output to be caused by the elimination of one worker. Then it refers to a definite economic quantity, to a determinate amount of goods or its equivalent in money.

The concept of a general productivity of labor as resorted to in popular talk about an allegedly natural right of the workers to claim the total increase in productivity is empty and indefinable. It is based on the illusion that it is possible to determine the shares that each of the various complementary factors of production has physically contributed to the turning out of the product.

That the increase in wage rates does not depend on the individual worker’s “productivity,” but on the marginal productivity of labor, is clearly demonstrated by the fact that wage rates are moving upward also for performances in which the “productivity” of the individual has not changed at all. There are many such jobs. A barber shaves a customer today precisely in the same manner his predecessors used to shave people two hundred years ago. A butler waits at the table of the British prime minister in the same way in which once butlers served Pitt and Palmerston. In agriculture some kinds of work are still performed with the same tools in the same way in which they were performed centuries ago. Yet the wage rates earned by all such workers are today much higher than they were in the past. They are higher because they are determined by the marginal productivity of labor.

The employer of a butler withholds this man from employment in a factory and must therefore pay the equivalent of the increase in output which the additional employment of one man in a factory would bring about. It is not any merit on the part of the butler that causes this rise in his wages, but the fact that the increase in capital invested surpasses the increase in the number of hands.

All pseudo economic doctrines which depreciate the role of saving and capital accumulation are absurd. What constitutes the greater wealth of a capitalistic society as against the smaller wealth of a non capitalistic society is the fact that the available supply of capital goods is greater in the former than in the latter.

What has improved the wage earners’ standard of living is the fact that the capital equipment per head of the men eager to earn wages has increased. It is a consequence of this fact that an ever increasing portion of the total amount of usable goods produced goes to the wage earners.

None of the passionate tirades of Marx, Keynes and a host of less well known authors could show a weak point in the statement that there is only one means to raise wage rates permanently and for the benefit of all those eager to earn wages—namely, to accelerate the increase in capital available as against population. If this be “unjust,” then the blame rests with nature and not with man.

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